England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE,
CHANCERY DIVISION
(MR JUSTICE PATTEN)

		Royal Courts of Justice Strand London WC2 Thursday, 12 July 2001

1. LORD JUSTICE ROBERT WALKER: This is an application for permission to appeal by Mr Howard Day, who has appeared in person. Mr Day wishes to appeal from an order of Patten J made on 14 May 2001 after a 13-day trial in the Chancery Division of the High Court.
2. The proceedings were commenced in the Queens Bench Division in or about March 1997 by 38 individual plaintiffs who had been shareholders in a company called Fayers Legal Services Ltd, ("FLS"). The defendants were Mr Clive Fayers and Mr Day.
3. The substance of the claim was that Mr Fayers had run FLS (of which he was a director, at any rate until he ceased under the Insolvency Act 1986, to be qualified to act as a company director) as if it were his own property and had misappropriated large sums of money from the company. Mr Day was said to have given Mr Fayers dishonest assistance in breaches of fiduciary duty and to have been in knowing receipt of funds misappropriated in breach of fiduciary duty. The plaintiffs had become shareholders in FLS in the belief that it had a properly run and potentially profitable business of assisting litigants (who were not eligible for legal aid) to prosecute their claims in return for a share of the recoveries. Mr Fayers had been an insurance broker and he had many respectable clients who became shareholders in FLS. Some of them gave evidence at the trial. On 18 December 1998 Collins J gave summary judgment against both defendants ordering Mr Fayers to pay £962,000-odd as the minimum sum for which he was liable to account, and ordering Mr Day to pay £473,000-odd, again as a minimum sum.
4. Collins J refused permission to appeal but both Mr Fayers and Mr Day obtained permission to appeal. However, then orders were made against both of them to provide security for costs. Mr Fayers was unable to provide his security, but Mr Day did provide the security for costs ordered against him and his appeal, at which he appeared in person, was successful.
5. This court decided on 9 December 1999 that the case against him should not have resulted in summary judgment but should go to trial in order that the evidence could be tested. The proceedings were then reconstituted with FLS itself as the main claimant and Mrs Patricia Taylor, who had a separate claim otherwise than as a shareholder in FLS, as an additional claimant.
6. The case was transferred to the Chancery Division where it was tried by Patten J. Mr Day represented himself and gave evidence on his own behalf. Mr Fayers gave evidence for Mr Day. There were many other witnesses. The thirteen days' duration of a trial originally scheduled to take five days must have imposed a considerable strain on Mr Day. He appears to be an intelligent businessman, but the conduct of a long trial is difficult for any litigant in person and I take that into account in my approach to the matter. The judge gave a very clear and thorough judgment running to 32 pages and 86 numbered paragraphs. Most of the judgment, that is down to paragraph 69, is concerned with a very careful review of the oral and documentary evidence and with the judge's findings of fact. The judge then in the latter part of his judgment considered Mr Day's possible liability under four heads: first, misfeasance as a de facto director of FLS; second, liability as if he were a constructive trustee for dishonest assistance to Mr Fayers in his misappropriations; third, liability as a constructive trustee for knowing receipt of trust monies which were paid to accounts of a business called Anderson Stuart & Co, which I will come back to, and also to a company called St Leonards Farm Ltd; and fourth, liability for misappropriation of £10,000 of Mrs Taylor's money. I should add that Mrs Taylor was not only a shareholder in FLS but also had a claim for relief in matrimonial proceedings, the conduct of which was to be financed by FLS.
7. The judge rejected the claim for misfeasance. He concluded that Mr Day was closely involved with FLS, but that nevertheless he was not a de facto director. He held that liability had been established under the head of dishonest assistance and not only in respect of money paid to Anderson Stuart & Co or St Leonards Farm Ltd. The judge said in paragraph 75 of his judgment, which states his conclusion on this point:

"But in my judgment Mr Day's liability under this head is wider than that. He is clearly liable for the payments which the Court of Appeal have identified because they were paid to accounts controlled by him and then utilised for Mr Fayers' benefit in breach of trust. But he is also liable for any other monies which were paid out of FLS direct to Mr Fayers from October 1994. From then on Mr Day was on the evidence fully aware that FLS was a fraud on the investors yet he took no action to alert investors to this fact. On the contrary he actively participated in the running of the company and with Mr Forsdike's help maintained the appearance of a business. He also attended the promotional events I have referred to in order to assist Mr Fayers to obtain yet further investment in the company. Given that Mr Day knew that most if not all of the company's money would be used in time to fund Mr Fayers' lifestyle in breach of his duties to the company and its shareholders I am satisfied that this amounts to knowing assistance on his part in all the breaches of fiduciary duty committed by Mr Fayers from October 1994. Without Mr Day it is unlikely that FLS could have operated as it did from 1994 until 1997."

8. I should add that Mr Forsdike was a struck-off solicitor who was supposed to be assisting in evaluating the litigants' claims. He nominally was attached to a firm of solicitors in South Wales but seems to have been based in the Home Counties and communicated with South Wales by modem. The judge therefore found it unnecessary for the claimants to rely on the alternative claim of knowing receipt but held, if necessary, they could have succeeded on that claim also. He held that the separate claim by Mrs Taylor was also established.
9. Mr Day has in support of his application for permission to appeal prepared a thorough and detailed document which serves as his proposed grounds of appeal and his skeleton argument. He has this morning largely relied on that document, although he has brought a few particular points to my attention and has raised one or two further points. To go through the grounds of appeal in similar detail would take up far more time than is allocated to the hearing of applications for permission to appeal. I can briefly identify nine main issues on which Mr Day attacks the judge's findings of fact with the relevant paragraph numbers of the judgment. First, paragraphs 22 to 23, whether Mr Day ceased to be the moving force in Anderson Stuart & Co by April 1994 when his sons, who did not give evidence, were aged 23 and 21, or whether, as the judge held, he remained the moving force in that business. Second, paragraphs 25 to 28, whether a bank account opened at Midland Bank, Hitchin really belonged to a company called Anderson Stuart Ltd or whether (as the judge held) Anderson Stuart & Co, Anderson & Associates and Anderson Stuart Ltd were used more or less interchangeably for the activities of what was essentially a single business. These first two questions were relevant primarily to the alternative ground of knowing receipt. Third, paragraphs 29 to 32, whether Mr Day knew of a report made in March or April 1994 by Mr John Allanson, a private detective, to the effect that Mr Fayers and others, although not I stress at that stage Mr Day, were:

"conducting a £5 million scam. This is to be done with the aid of a barrister in the North of England and was to do with a legal assistance company called Fayers Legal Services Ltd, registered at Clive Fayers' home address".

10. Fourth, paragraphs 35 to 38, whether the judge was right to accept the evidence of Mr Frieze, a registered insolvency practitioner, who was the supervisor of an individual voluntary arrangement in respect of Mr Fayers and also, Mr Day has told me this morning, concerned as insolvency practitioner in respect of another company of Mr Fayers which had then gone into liquidation or receivership. Fifth, paragraphs 41 to 42, whether the judge erred in his conclusions about the sale of some property of Mr Fayers in Florida and Mr Day's part in what happened to the proceeds of sale. Sixth, paragraphs 43 to 46, whether the judge erred in his assessment of the part played by Mr Day in a promotional meeting at Le Manoir aux Quat Saisons, Oxfordshire on 19 October 1994. Seventh, paragraphs 47 to 51, whether the judge erred in accepting the truth of an attendance note by Mr Frieze of a meeting in Leeds on 4 November 1994. Eighth, paragraphs 52 to 54, whether the judge erred in his assessment of the part which Mr Day played in another promotional meeting at the Compleat Angler, Marlow in August 1995. Ninth, paragraphs 57 to 61, Mr Day's part in letters written on the writing paper of a solicitor's firm which never existed, Lloyd-Bainbridge & Co. Mrs Maureen Lloyd-Bainbridge does exist. She was a licensed conveyancer with the same firm of solicitors in New South Wales as employed Mr Forsdike.
11. I have carefully considered all Mr Day's criticisms as far as it is possible to do so without a full transcript of the evidence. No full transcript has been obtained and I can well understand that the expense of obtaining a full transcript of a thirteen day hearing may be beyond Mr Day's resources. I make no criticism of the absence of a transcript, but simply note that I have not been able to refer to one.
12. Mr Day has, to my mind, succeeded on some very minor points. He has, for instance, pointed out that Mr Frieze started by saying that the meeting in Leeds had been held in London. That is however only one detail. My very strong impression of the matter as a whole is that the judge took full advantage of seeing and hearing the witnesses and that his careful consideration of the evidence is reflected in his very clear and thorough judgment. He accepted most of the evidence of Mr Frieze which is relevant on points 4, 5 and 7 above, and also generally, but only as it seems to me after carefully testing it against the documentary evidence and against other oral evidence which the judge had received. The judge did not, as I read his judgment, ignore part of the evidence of Mr Terence Brealey, whose troubles led to the first meeting between Mr Day and Mr Fayers. On the contrary, paragraphs 31 and 32 of the judgment contain a balanced assessment of all the evidence as to how much Mr Day knew at that time, in 1994, about Mr Allanson's reports and the judge reached a balanced conclusion on that point.
13. As regards the episode of the Florida property, it is impossible, in the absence of a transcript, to be sure whether or not the judge ignored some of the evidence of Mr Frieze, as Mr Day asserts. The fact is however that in relation to that episode the judge had contemporaneous documentary evidence to go on and he reached a clear conclusion which was based on documentary evidence. That conclusion is set out in paragraph 42:

"It is clear from the correspondence sent to the Florida agents that Mr Fayers and Mr Day deliberately prevented the agents from contacting Mr Frieze and they can only have thought it necessary to do that because they were both aware that Mr Frieze would almost certainly assert a claim to the proceeds of sale. If there was any doubt about the matter it was put straight at the meeting on 20th December 1994. I regard the reply sent to Mr Frieze on 24th May 1995 as a false account of the events there described but the fact that it was written and sent in those terms is the clearest possible evidence that by September 1994 if not before Mr Day had become so closely involved with Mr Fayers that he was prepared to assist him in actions which he knew were improper and unlawful. Part of Mr Day's case in cross-examination was that he had no cause to doubt Mr Fayers' honesty before a meeting of shareholders in FLS which was held at The Three Stags Public House in Lambeth on 12th November 1996. It will be apparent from the findings that I have just made that I do not accept that evidence."

14. As regards the two promotional meetings at Le Manoir aux Quat Saisons and at the Compleat Angler, the judge had the benefit of evidence from a number of individuals who had been present on that occasion as shareholders in the company: Mr Brian Forsey, Mr Peter Grimditch, Mr Brian Lovell and Mr David Brodey. Those witnesses were no doubt not wholly impartial because they had suffered severe losses. The judge referred to the troubles of Mr and Mrs Lovell as "another depressing example of how people's lives have been ruined by the activities of Mr Fayers". However, the judge accepted all those four individuals as honest and reliable witnesses.
15. In his oral submissions to me this morning Mr Day has raised one further point which I have not so far dealt with. That is the separate claim of Mrs Taylor. He suggests that the judge ignored his defence to that claim, which was that she consented to the retention of £10,000 on account of her fees. However, it is clear from paragraph 85 of the judgment that there was an acute conflict of evidence on that point and that the judge accepted the evidence of Mrs Taylor and rejected that of Mr Day.
16. I take into account all that Mr Day has said about his difficulties in conducting such a heavy case as a litigant in person. Nevertheless, having considered carefully all the papers before me, I see no prospect of the full Court of Appeal being persuaded that the judge was so wrong in his assessment of the witnesses and of the documentary evidence that his order should be overturned. Any appeal would be an appeal on fact and would, in my view, be hopeless. I must therefore dismiss this application.
Order: Application for permission to appeal dismissed.